Includes bibliographical references (pages 369-391) and index.

Introduction: The real problem was nominal -- The value of money. Cognitive illusions in economics ; The value of money and money illusion ; What determines the value of money? ; The quantity theory of money and the Great Inflation ; Money at the extremes: hyperinflation and deflation ; It's (almost) all about expectations -- The dance of the dollar. The Great Depression and the AS-AD model ; One derivative beyond Hume ; Rational expectations and efficient markets -- Never reason from a price change. The musical-chairs model ; What is monetary policy? ; Nominal and real exchange rates -- How to think about macroeconomics. The path to market monetarism ; I see dead patterns ; Good economists don't forecast, they infer market forecasts ; The secret history of monetary policy -- The Great Recession. Fed policy in 2008: a case of self-induced paralysis? ; A confession of contractionary effect ; Schadenfreude on the Titanic ; Alternative explanations of the Great Recession -- What does it all mean? Policy implications of market monetarism ; Why should you believe in market monetarism.

"The Money Illusion is George Mason University economist Scott Sumner's end-to-end case for an evolved, less discretionary approach to monetary policy, which he and his cohort have termed "market monetarism." The nominal use of "market" here is telling: Sumner argues that public confidence in central banking institutions like the Fed is central, and as critical as forecasting, to ensuring the health and stability of the economy. To achieve it, he makes a case that monetary policy should be indexed against a pre-set growth trajectory (in the form of a steadily increasing nominal GDP), not regulated ad-hoc through interpretations of short-term market changes. As Sumner tells it, the Fed is simultaneously responsible for the Great Recession and our best safeguard against having it happen again. Part of that is a responsibility to chart a course, and to do so with transparency"--